Report: Iowa Employers Steal $900M A Year From Workers

If you’ve ever been denied overtime pay or been paid less than minimum wage, it’s likely you’ve been a victim of wage theft, which a new report shows has grown to become a nearly billion-dollar problem in Iowa.

According to Common Good Iowa, employers were stealing over $900 million per year from a quarter of a million Iowa workers.

That’s around 1 in every 7 workers, the group said. It is also increasing; the last time the report was done 10 years ago, that amount was just $600 million stolen a year.

“This insidious and growing problem costs Iowans 10 times more than all other forms of theft combined,” said Sean Finn, a policy analyst at Common Good who authored the report, “A Heist in Plain Sight,” released this week.

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Well over half of that money, or $501 million, is from employers not paying required overtime pay for more than 40 hours of hourly work, which in many cases is equal to time-and-a-half of employees’ regular wage. Another $241 million is from minimum wage violations.

And only a tiny fraction is ever recovered, the report found, probably because the state has just two wage claim investigators overseeing 1.6 million workers.

“Iowans want a government that protects them from crime and injustices. But of the $900 million stolen by employers each year, government agencies recover an average of just $2 million—less than 1 percent,” the report found.

That’s not just money out of your pocket: By cheating employees out of what they’re rightfully owed, employers are also cheating local, county, and state governments out of tax revenue, to the tune of $190 million per year—money that would otherwise help pay for roads, schools and taking the burden off of property taxes.

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Who are most likely victims of wage theft?

Wage theft can happen in any industry, but is especially prevalent in food service, hospitality, nursing, child care, and construction, according to the report. It’s also more likely to happen to vulnerable workers whose employers think they can take advantage of, like recent immigrants, people who don’t speak English fluently and those who have disabilities.

It can happen when tipped workers are illegally forced to share tips in a restaurant, or when workers on a construction project are improperly classified as “independent contractors,” which employers use to avoid paying things like unemployment insurance.

And when cases are found, it’s not always easy to get employers to pay it back.

One longtime Short’s Burger employee in Iowa City didn’t realize she had been working overtime without getting paid fairly for it for the past 13 years until she reached out to the Center for Worker Justice of Eastern Iowa for help getting paid after she was injured on the job.

“Workers have to take many steps just to get paid the wages they are owed,” said Mazahir Salih, executive director of the Center for Worker Justice.

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What can be done?

The report suggests three big things that would start reversing the massive problem of wage theft.

• First: The state should hire more people focused on the problem. Two people isn’t cutting it, Finn said.

“Better enforcement begins with having enough staff to do the job,” he wrote.

• Second: The state needs to get rid of the cap.

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Iowa Workforce Development allows victims to claim up to $6,500 on wage claims if they happened less than a year ago, meaning there’s no penalty if an employer steals far more than that or if it’s been going on a lot longer.

“(That) means the worst cases are the first ones ignored,” Finn said, calling it “barely a slap on the wrist” even in the rare cases employers are brought to justice.

• Finally: Most victims don’t even know what their employer is doing is illegal, or taking money out of their pocket. By sharing the report or articles about it, particularly with workers most at risk, workers will be more knowledgeable. And knowledge is power.

“Thousands of Iowa workers go to work each day thinking they are protected, that laws require their employers to pay them the right amount on time,” said Paul Iversen, an educator at the University of Iowa Labor Center, who has worked on wage theft cases. “Sadly, for many Iowans, that just isn’t true.”

The state responds

“Iowa Workforce Development agrees that unpaid wages are an important issue for Iowa workers,” said Jesse Dougherty, public information officer for the department, in response to the article.

“We are working diligently on multiple fronts to ensure that workers receive all the money they are properly due,” he added. “This includes our newly expanded efforts, backed by part of a recently announced $2.9 million grant, to boost efforts at identifying those Iowa workers who are misclassified under the law.”

He said any Iowan who thinks they may be a victim of wage theft should file a claim with Iowa Workforce Development.

Normally, the state employs four people, not two, on wage theft—but Dougherty said they dropped a position recently and another investigator was currently on leave. Another four people, plus 12 field auditors, work on cases of worker misclassification.

And the reason IWD only accepts claims of less than $6,500, Dougherty said, is because that’s the limit for small-claims court—and that’s mandated by Iowa law, he said.

“When a relatively high amount of wages is due, it becomes possible for claimants to obtain an attorney and pursue the matter via a private lawsuit,” he said.

That’s assuming, of course, that low-wage workers denied thousands in wages can actually afford that.

This article was update to include information from Iowa Workforce Development.

By Amie Rivers
10/14/22

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